WYNN: VEGAS THE STANDOUT FOR A CHANGE

Wynn blew out our Street high LV estimate even after normalizing hold %. Don’t expect the same results from the rest of the Strip though.

 

 

As we expected, Wynn started off 2011 with a bang – blowing away Street EBITDA estimates by 28% and exceeding our estimate by 10%.  The entire beat vs. our number was due to better Vegas results, which were driven by very high hold on the table side. Wynn Macau numbers fell slightly short of our Street high estimate due to what looks like higher junket commissions.  Overall, luck boosted Wynn’s Q1 result by $44MM on net revenue and $42MM on EBITDA.  [Wynn Vegas: $50MM revenue benefit and $35MM EBITDA benefit; Wynn Macau: $6MM revenue negative impact but a $7MM positive EBITDA impact]

 

Las Vegas

The upside in Vegas this quarter vs. our Street high estimate was mostly driven by high hold.  Net revenue of $395MM was 11% ahead of our estimate and adjusted property EBITDA of $132MM was 51% above our estimate.  If hold had been normal, we estimate that net revenues and EBITDA would have been $50MM and $35MM lower, respectively – still a terrific beat vs. Street at $74 million and even above our $87 million.

  • Net Casino revenues of $194MM came in 13% above our estimate
    • Table win was $32MM higher than we estimated, entirely due to high hold. Assuming a more normalized hold rate of 22.5%, table win would have been $50MM lower and EBITDA would have been about $35MM lower
    • Table drop increased 14% YoY – less than the 20% increase we estimated
    • Slot win was $1MM above our estimate.  Wynn has historically had one of the lowest win % on the Strip so we assume they adjusted their slot mix.  Slot handle grew 7% less than our 10% estimate.
    • Rebates on gross win increased to 19% of gross revenue vs. an average of 16% in 2010
  • Non-gaming revenues net of promotional allowances were 12% higher than our estimate
    • Room revenues were $8.6MM higher than we estimated driven by RevPAR that was 8% better than we estimated. Wynn chose to push rate ADR 18% while occupancy declined 2% YoY.
    • Promotional allowances fell to 25% of net casino revenues, down from a 2010 average of 33%
  • It appears that SG&A was flat YoY at $50MM in Las Vegas

Macau

Wynn Macau came up a little short of our estimate but still 4% ahead of Street EBITDA estimates. Wynn Macau’s net revenue was 1% below our estimate while EBITDA was 7% below our estimate. We believe that the majority of the EBITDA miss vs. our estimate was due to higher junket commissions.

  • Net casino revenue of $812MM was $7MM below our estimate
    • Gross VIP table win was $2MM below our estimate while net VIP table win of $553MM was $5.5MM below our estimate
      • Table volume of $29.3BN was $200MM below our estimate while hold of 2.69% was 1bps above our estimate.
      • Direct play was 10% for the quarter vs. our estimate of 11%, due to the introduction of new junket operators. We would expect the direct play share to fall a bit further for the balance of the year with the introduction of 20 more VIP tables.
      • The rebate rate was 82bps (vs. our estimate of 80bps) or 30.5% of hold %.
      • Had hold been normal at 2.85%, gross table win would have been $47MM higher and net revenues would have been $33MM better while EBITDA would have been $8MM higher. 
    • Mass table win was $1MM below our estimate
      • Table volume grew 29% YoY vs. our estimate of 50%. However, lower volume growth was offset by high hold.
      • Assuming 24% hold, revenues would have been negatively impacted by $27MM and EBITDA would have been $15MM lower
  • Non-gaming revenues net of promotional allowances was $2MM below our estimate due to slightly lower F&B revenues and slightly higher promotional allowances
  • We estimate junket commissions (in excess of rebate rates) were $17MM above our estimate
    • Our best guess is that the blended commission rate increased to 43.6% compared to 40.6% in 2010 and 42.2% in 2009.  We had estimated a blended commission rate of 41%.
    • We estimate that fixed costs were $94MM in the quarter – in-line with our estimate

Other stuff

  • Corporate came in $9.5MM lower than we estimated – down 50% sequentially and up 13% YoY

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